After a dismal debut 30 days ago, the shares of Paytm parent One97 Communications tumbled 13% intraday on Wednesday to Rs 1,297.70 pm on the Bombay Stock Exchange (BSE). The sell-off was witnessed on a day when the 30-day lock-in period of anchor investors ended.
The Noida-based company had raised Rs 8,235 crore from anchor investors in a pre-IPO funding round. It had allotted 38.30 million or 5.9% of float to global marquee investors and domestic funds at Rs 2,150 per share. Top sovereign wealth funds and financial investor such as Singapore’s GIC, Canada’s CPPIB, BlackRock, Alkeon Capital, Abu Dhabi Investment Authority were among those allotted One97 Communications shares as part of anchor round.
Anchor investors are large institutional investors such as sovereign wealth funds or mutual funds etc who are allotted shares of the company reserved for Qualified Institutional Investors (QIIs) one day prior to the issue being opened to general public. The application size of these investors is usually more than Rs 10 crore and they cannot sell their shares before 30 days.
The stock later recovered to Rs 1414.95 on the BSE, which is 5.23% lower as compared to Tuesday closing levels. It hit its 52-week low of Rs 1271.25 on November 22. The scrip of the digital payment major continues to trade at discount from its issue price of Rs 2150 which it hasn’t been able to scale since listing.
At its issue price of Rs 2,150, Paytm had sought a market capitalisation of Rs 1.5 lakh crore. The same has been reduced to Rs 91,921.96 crore as of 12.25 pm Tuesday. This translates into an erosion of Rs 58 crore investor wealth in 30 days of listing.
At Rs 18,500 crore, Paytm was India’s biggest IPO which saw a subscription of just 1.89 times while was far less than other new-age internet companies such as Nykaa parent FSN E-commerce Ventures and Zomato which also made their debut on the bourses in the past few weeks.
Global brokerage Macquarie in a report released on Paytm’s listing day had valued the stock at Rs 1200 at 0.5 times price to sales growth multiple on December 23 annual sale.
“Paytm has been a cash-burning machine, spinning off several business lines with no visibility on achieving profitability. Unless Paytm lends, it can’t make significant money by merely being a distributor,” said the Macquarie report. Brokerage Zerodha’s Nikhil Kamath of Zerodha is also bearish on the company and wary of “ridiculous” valuations. Kamath thinks there is a need to find a balance between high growth offered & “crazy” valuation.
Karan Mohla of Chiratae Ventures earlier told ET Now that there is an interest in the market for new-age tech companies. When asked about fintech companies like Paytm, Mohla said that the sector has a lot of scope for further digitisation and one must stop and think when they see companies going for majority OFS in IPO.
